Reflecting on $1 Trillion in Student Debt, and Why We're Headed for $2 Trillion
This week marks the two-year anniversary that student debt hit $1 trillion, and like any milestone anniversary, it’s worth taking some time to reflect on how we got here—and where we’re headed.
Roughly, outstanding student debt sits at $1.2 trillion. For some perspective (and depending on which source you prefer), this figure was around $250 billion in 2003. This, suffice it to say, represents a staggering rate of growth in student loans in a very short period of time. The growth rate of outstanding student loans exceeded 12% in the middle of 2011-12 alone, before slowing down a bit to 8.5% in 2013.
Even at the current (slower) rate of 8.5%, the $1.2 trillion in outstanding student loan debt will become $2 trillion in just 8 years, sometime around 2022.
There are million (trillion?) reasons for why total student loan debt has shot so high over the past decade—increased college enrollment (until recently), huge increases in the cost of graduate education, the high cost of for-profit education, income stagnation among middle class and low-income households and the loss of wealth sources that previously were used to fund college (home equity, for example). One enormous and consistent driver, however, is the systematic disinvestment in institutions where 75% of college students attend: public colleges and universities.
New data this week from the State Higher Education Executive Officers bears this out. The good news is that 2013 was the first in many years in which states actually increased appropriations for higher education. Unfortunately, the increase was only 1.4% per full-time student. But in a year in which total state funding increased slightly, 20 states still cut per-student funding. Arkansas alone cut funding by 17.5%.
And even factoring in the increase, state funding per student is down 23% since 2008 and down nearly 29% over the last 25 years. States spend $2,685 less per full-time student than they did in 2001, the height of state funding. In this context, a 1.4% increase amounts to very little. (Note: these numbers are consistent with Demos’ recent post-recession update to the Great Cost Shift, which used data through 2012)
And indeed, students are shouldering more of the costs at—and this bears repeating—public institutions. The percentage of total educational revenue (that is, what funds college) covered by tuition reached a high of 47.4% in 2013. In other words, nearly half of college costs at public schools are being funded by students. Again, for perspective, tuition covered only about a third (35.6%) of educational spending just five years ago, and less than a fourth (23.8%) 25 years ago.
The shift from public higher education to something resembling a private system has been swift, indeed. And this shift has a lot to do with why we're on our way to celebrating the $2 trillion anniversary sooner than many of us would have hoped.
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